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Versabank (TSE:VBNK)
TSX:VBNK
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Versabank
(TSX:VBNK)
Select Model
Select Model
Rating:62Neutral
Price Target:
C$21.00
▲(9.55% Upside)
Action:ReiteratedDate:03/06/26
The score is driven mainly by decent financial strength (improving leverage and strong recent cash generation) but held back by clear profitability deterioration (lower margins/ROE and elevated efficiency ratio). Technicals are also a drag with the stock trading below key short-term moving averages and weak RSI, while valuation is only moderately supportive.
Positive Factors
Conservative leverage / balance-sheet resilience
A low debt-to-equity (~0.20) and steady equity growth provide capital resilience and lower solvency risk. This conservative leverage profile supports lending capacity through cycles, reduces refinancing stress, and preserves capacity to absorb credit losses over a multi‑month horizon.
Strong operating and free cash flow
Consistent positive operating and free cash flow with recent high FCF growth indicates the business converts earnings into cash. That strengthens funding flexibility, supports reinvestment or dividend capacity, and improves resilience to funding shocks over the medium term.
Digital, branchless, niche-lending business model
A branchless, technology-enabled model reduces fixed overhead and allows scalable deposit gathering and loan origination. Focus on specialized and partner-originated lending can create durable NII streams and structural advantages against larger branch-dependent peers.
Negative Factors
Profitability deterioration (low ROE, compressed margins)
Material margin compression and a falling ROE reduce capital productivity and long‑term returns. Sustained weaker profitability constrains retained earnings growth, limits reinvestment, and may hamper competitive positioning if it persists across several quarters.
Elevated efficiency ratio / cost pressure
A high and volatile efficiency ratio signals the bank is spending a larger share of revenue on operating costs, undermining margin recovery even if revenues rise. Persistent cost inefficiency can impair long‑term earnings scalability and sensitivity to slower top‑line growth.
Concentration and credit sensitivity from partner-originated loans
Reliance on niche and partner-originated loan programs concentrates credit exposure and ties earnings to credit performance. Holding these loans on balance sheet increases sensitivity to provisioning cycles and elevates portfolio risk if a partner sector weakens over the medium term.
Versabank (VBNK) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$612.40M
Dividend Yield0.49%
Average Volume (3M)22.00K
Price to Earnings (P/E)15.3
Beta (1Y)1.51
Revenue Growth3.31%
EPS Growth-39.12%
CountryCA
Employees121
SectorFinancial
Sector Strength70
IndustryBanks - Regional
Share Statistics
EPS (TTM)0.38
Shares Outstanding31,945,536
10 Day Avg. Volume37,575
30 Day Avg. Volume21,998
Financial Highlights & Ratios
PEG Ratio-0.47
Price to Book (P/B)0.99
Price to Sales (P/S)1.73
P/FCF Ratio3.53
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$21.11Price Target Upside10.10% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)1.74
Revenue Forecast (FY)C$155.32M
Versabank Business Overview & Revenue Model
Company DescriptionVersaBank, a schedule I chartered bank, provides various banking products and services in Canada. The company offers deposit products, such as guaranteed investment certificates, registered retirement savings plans, daily interest savings accounts, and tax-free savings accounts, as well as deposit insurance products. It also provides lending services, including point of sale financing that involves purchasing loan and lease receivables from finance companies operating in various industries; and commercial banking services comprising commercial real estate, public sector/infrastructure financing, condominium financing, and residential mortgages. The company was formerly known as Pacific & Western Bank of Canada and changed its name to VersaBank in May 2016. VersaBank was incorporated in 1979 and is headquartered in London, Canada.
How the Company Makes MoneyVersabank generates revenue primarily through interest income from loans and advances made to customers. This includes personal loans, mortgages, and commercial lending. Additionally, the bank earns income from fees associated with its various banking services, including transaction fees, account maintenance fees, and payment processing services. Versabank's revenue model is further bolstered by its partnerships with technology firms and fintech companies, which enable it to offer enhanced digital services and attract a broader customer base. The bank's focus on low-cost, efficient operations also contributes to its profitability, allowing it to maintain competitive interest rates while maximizing margins.
Versabank Earnings Call Summary
Earnings Call Date:Jun 04, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Jun 10, 2026
Earnings Call Sentiment Neutral
The earnings call highlighted significant achievements such as record revenue, asset growth, and an increase in net interest margin. However, this was tempered by the impacts of foreign exchange losses, costs from structural realignment, and a decline in cybersecurity revenue. The positive elements are significant, but the lowlights are notable and impactful.Q2-2025 Updates
Positive Updates
Record Revenue and Asset Growth
VersaBank reported record total assets of over $5 billion, a 15% year-over-year increase, and record consolidated revenue of $30.1 million, up 6% year-over-year and 8% sequentially.
Expansion of Net Interest Margin
Net interest margin on credit assets increased 23 basis points sequentially, driven by favorable trends including the replacement of maturing higher interest rate term deposits with lower rate ones.
Strong U.S. Receivable Purchase Program Performance
The U.S. RPP portfolio surpassed USD 70 million in drawdowns by the end of the quarter, contributing to the growth in credit assets.
Canadian Residential Construction Loan Portfolio Growth
There was growth in the Canadian residential construction loan portfolio, contributing to the overall increase in credit assets.
Increase in Book Value Per Share
Book value per share increased to a record $16.25, indicating an increase in shareholder equity.
Negative Updates
Impact of Foreign Exchange Translation
The bank experienced a large unrealized noncash loss due to a precipitous drop of the U.S. dollar versus the Canadian dollar, negatively affecting income.
Preliminary Costs for Structural Realignment
The bank incurred $900,000 in preliminary costs associated with the proposed structural realignment, affecting net interest expenses.
Decrease in Cybersecurity Revenue
DRT Cyber's revenue decreased to $1.8 million from $2.3 million in Q2 of last year, and the segment reported a net loss of $652,000.
Increased Provision for Credit Losses
Provision for credit losses increased to 0.08% of average credit assets, higher than the 12-quarter average of 0.02%, due to increased uncertainty in the economic outlook.
Company Guidance
In the call discussing VersaBank's second quarter fiscal 2025 financial results, several key metrics and strategic initiatives were highlighted. The bank achieved record total assets of over $5 billion, a 15% increase year-over-year, and record credit assets of $4.52 billion. The U.S. Receivable Purchase Program (RPP) saw its portfolio surpass USD 70 million, with expectations to reach at least USD 290 million by year-end. Total consolidated revenue reached a record $30.1 million, up 6% from the previous year, driven by an expansion of the net interest margin (NIM), which increased by 23 basis points. Earnings per share, excluding certain items, were $0.28. The bank's Canadian operations continued to be the primary revenue driver, while U.S. operations experienced a 22% sequential revenue increase. VersaBank also announced a structural realignment to align with the U.S. bank framework, anticipating cost reductions and risk mitigation. The bank's CET1 ratio rose to 14.28%, and they anticipate further growth in their core earnings due to ongoing positive trends in credit assets and net interest margins.Versabank Financial Statement Overview
Summary
Solid overall fundamentals supported by improving leverage (debt-to-equity ~0.20) and strong, positive operating/free cash flow with high recent FCF growth. Offsetting this, profitability has weakened versus 2023–2024 (net margin ~9% TTM and ROE ~5%), and KPI trends flag cost pressure (efficiency ratio elevated/volatile), which tempers the quality of earnings despite stronger net interest income and balance-sheet growth.Income Statement
TTM (Trailing-Twelve-Months) revenue is up sharply versus the prior annual period (roughly +3%), showing continued top-line progress. However, profitability has softened versus 2023–2024: net margin is ~9% TTM versus mid-to-high teens previously, and EBIT/EBITDA margins have also compressed materially. Net income remains positive, but the trend suggests the bank is operating with less earnings efficiency than in the last two years.62
Positive
Balance Sheet
Leverage appears conservative for the company’s reported debt metrics, with debt-to-equity around ~0.20 in TTM (Trailing-Twelve-Months), improving versus 2022–2024. Equity has grown steadily over the period, supporting balance-sheet resilience. The main offset is a lower return on equity (~5% TTM), down meaningfully from 2023–2024 levels, implying weaker capital productivity despite the sturdier leverage profile.70
Positive
Cash Flow
Cash generation is a clear positive: operating cash flow and free cash flow are strong and positive in TTM (Trailing-Twelve-Months), and free cash flow growth is high versus the prior annual period. Free cash flow is roughly in line with net income (near 1x), suggesting earnings are broadly backed by cash. Volatility remains a consideration given the earlier years showing negative operating and free cash flow (2021–2022) and a decline in free cash flow in 2025.65
Positive
| Breakdown | TTM | Oct 2025 | Oct 2024 | Oct 2023 | Oct 2022 | Oct 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 312.65M | 304.15M | 294.40M | 237.92M | 132.54M | 94.69M |
| Gross Profit | 129.24M | 120.23M | 111.63M | 108.03M | 81.94M | 65.80M |
| EBITDA | 48.95M | 44.59M | 57.43M | 59.43M | 34.49M | 32.52M |
| Net Income | 31.38M | 28.46M | 39.75M | 42.16M | 22.66M | 22.38M |
Balance Sheet | ||||||
| Total Assets | 6.15B | 5.81B | 4.84B | 4.20B | 3.27B | 2.42B |
| Cash, Cash Equivalents and Short-Term Investments | 628.00M | 582.66M | 226.21M | 133.19M | 89.53M | 271.52M |
| Total Debt | 103.97M | 108.51M | 108.58M | 110.62M | 109.42M | 100.39M |
| Total Liabilities | 5.60B | 5.28B | 4.44B | 3.82B | 2.92B | 2.08B |
| Stockholders Equity | 543.08M | 532.67M | 399.20M | 377.16M | 350.68M | 332.11M |
Cash Flow | ||||||
| Free Cash Flow | 130.31M | 149.44M | 254.13M | 94.36M | -33.23M | -108.32M |
| Operating Cash Flow | 129.98M | 150.40M | 272.70M | 94.72M | -32.65M | -108.31M |
| Investing Cash Flow | -200.34M | 212.26M | -157.58M | -28.14M | -141.61M | -8.44M |
| Financing Cash Flow | 371.18M | 102.04M | -23.33M | -17.31M | -6.30M | 131.40M |
Versabank Technical Analysis
Negative
19.17
Price Trends
21.55
Negative
19.61
Negative
17.74
Positive
Market Momentum
-0.75
Positive
33.30
Neutral
8.01
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:VBNK, the sentiment is Negative. The current price of 19.17 is below the 20-day moving average (MA) of 21.45, below the 50-day MA of 21.55, and above the 200-day MA of 17.74, indicating a neutral trend. The MACD of -0.75 indicates Positive momentum. The RSI at 33.30 is Neutral, neither overbought nor oversold. The STOCH value of 8.01 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:VBNK.
Versabank Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
71 Outperform | C$545.51M | 11.42 | 9.36% | 7.95% | -13.69% | -1.60% | |
69 Neutral | C$910.70M | 11.86 | 11.93% | 7.33% | 7.74% | -31.96% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
65 Neutral | C$3.90B | 12.46 | 8.72% | 2.09% | -7.50% | -34.45% | |
62 Neutral | C$612.40M | 15.26 | 5.89% | 0.49% | 3.31% | -39.12% | |
56 Neutral | C$551.14M | 16.44 | 5.09% | 10.00% | -9.00% | -35.22% | |
48 Neutral | C$1.79B | -21.78 | 5.11% | 4.67% | -11.26% | ― |
* Financial Sector Average
TSE:VBNK
Versabank
19.17
4.48
30.51%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.